Explain supernormal equilibrium, Managerial Economics

Assignment Help:

Q. Explain Supernormal Equilibrium?

Supernormal Equilibrium: E is the point of stable equilibrium as MC = MR and MC cuts the MR from below.  

278_Explain Supernormal Equilibrium.png

Figure: Supernormal Equilibrium

This is point the firm produces OM amount of output. To produce this output, firm incurs an average cost of MF, whereas it earns average revenue of ME. Because at equilibrium ME > MF, firm makes a profit of FE per unit of output sold. Again, because the total revenue earned when OM is sold is OPEM and total cost incurred to produce same output is ORFM, total profit earned at that level of output is RPEF.


Related Discussions:- Explain supernormal equilibrium

Types of elasticity, what are the examples of the types of elasticity (pri...

what are the examples of the types of elasticity (price,income & cross elaticity

Explanation of business cycle, Causes There are a number of explanatio...

Causes There are a number of explanations of the business cycle but changes in the level of investment seem to be the most likely.  In the simplest Keynesian model an increase

Me, In a one-shot game, if you advertise and your rival advertises, you wil...

In a one-shot game, if you advertise and your rival advertises, you will each earn RM5 million in profits. If neither of you advertises, your rival will make RM4 million and you w

Determinants of demand, Determinants of Demand Price elasticity of dema...

Determinants of Demand Price elasticity of demand fluctuates from commodity to commodity. Whereas the demand of some commodities is highly elastic, demand for others is highly

Characteristics of money, Characteristics of Money Over time, therefor...

Characteristics of Money Over time, therefore, it became clear that for an item to act as money it must possess the following characteristics. Acceptability If

Measures to control inflation, Measures to control inflation An inflat...

Measures to control inflation An inflationary situation can effectively be addressed/tackled if the cause is first and foremost identified.   Governments have basically three

The acceleration principle, THE ACCELERATION PRINCIPLE Suppose that th...

THE ACCELERATION PRINCIPLE Suppose that there is a given ratio between the level of output Y t at any time t , and the capital stock required to produce it K t and that

determine the wage rate , Northern Lumber operates a large lumber-processi...

Northern Lumber operates a large lumber-processing mill in a small town in Washington State.  It is one of the larger lumber producers in the region and has some market power in th

Annual and monthly premiums charged, Green Shield Insurance gives NEMO Corp...

Green Shield Insurance gives NEMO Corporation with coverage for prescriptions, dental work, and extended health services. Every subscriber uses $435 worth of dental services per ye

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd